Potential scale of Scottish seaweed-based industries: research paper

F Economic Analysis Methodology and Key Results

F.1 Introduction

F.1.1 This appendix sets out the methodology employed to estimate the impacts of the Scottish seaweed industry on the Scottish economy, in terms of business turnover, its economic impact as measured by Gross Value Added (GVA) and employment impacts as measured by full-time equivalents (FTE). Firstly, it will present the key definitions, before outlining key assumptions and methodological steps for turnover estimates. Following this, assumptions used in the GVA and employment analysis will be set out, followed by the methodology for assessing the wider impacts of the seaweed industry in terms of future projected economic growth (GVA) and employment impacts under each scenario (the Business as Usual (BAU) scenario and the higher growth scenario). Furthermore, it will provide key assumptions made around the Scottish economy and two illustrative communities.

F.2 Definitions

F.2.1 Throughout this report, reference will be made to direct, indirect, induced effects and total effects which are defined as follows:

• Direct effect: When there is an increase in final demand for a product, the equivalent increase in output to meet this final demand is referred to as the direct effect;
• Indirect effect: To meet the increase in final demand for a product, firms will need resources and services from their supply chains; the increase in output for firms along the supply chain to meet this demand is referred to as the indirect effect;
• Induced effect: The increase in turnover from both the direct and indirect effects will subsequently lead to an increase in the level of household income because of the effect on wages, a proportion of which will be re-spent on domestically produced products which is referred to as the induced effect; and
• Total effect: Total effects represent the total impact on the economy, and comprise of direct, indirect and induced effects.

F.3 Assumptions and multipliers for turnover effect estimates

F.3.1 To estimate the impacts on turnover, the following assumptions have been made:

• Before applying the input-output multipliers to the projected growth of the industry, growth has been adjusted for taxes less subsidies on products^[68].
• In order to match the increased demand under both the BAU and higher growth scenarios, it is necessary to make some assumptions around the value of seaweed per tonne. Since this is not available for Scotland, the value of Irish seaweed production is used as a proxy. The value of Irish harvested seaweed is estimated to be worth EUR 135^[69] or £120 per tonne^[70]. This is a simplification that assumes an average value across all species; in reality, it is expected that there would be variation in price by species. Additionally, given that most businesses in the seaweed industry in Scotland are vertically integrated it has been assumed that any additional value obtained from higher value seaweed is captured within the turnover of high value products. In particular, this assumption applies to the higher value of cultivated seaweed (likely a higher price than harvested seaweed, for example, see Crown Estate Scotland (2021)). As such, it is possible that some of the value could be underestimated if excess cultivated seaweed is sold to other businesses. However, given the projected scenarios, this is deemed to be unlikely.
• It is assumed that current seaweed production from wild harvesting in Scotland is 8,000 tonnes per year. It is assumed that the maximum consented tonnage (under CES licence) will increase to 30,000 tonnes per year by 2040.
• It is assumed that there is spare capacity in the economy to meet the extra demand;
• It is assumed that newly created economic activity is entirely additional, that it does not replace other activity.

F.3.2 There are currently no available input-output multipliers for seaweed production in Scotland. As such, multipliers have been developed based on input from consultation and a literature review of similar industries. It should be noted that these multipliers should be treated as indicative estimates, erring on the side of caution. They are described as follows:

Output multiplier for seaweed production from wild harvesting

F.3.3 As a conservative estimate, the multiplier which has been used for seaweed production from the wild harvesting sector is 1.17. This is based on a study on the Welsh cockle industry (used as a proxy for a relatively small-scale industry with a limited supply chain), which developed a specific multiplier, based on information from stakeholder interviews, direct observation, secondary data, and production and price data. This multiplier has been used as a conservative estimate for seaweed production from wild harvesting under the BAU and higher growth scenario.

Output multiplier for seaweed cultivation

F.3.4 The multiplier for seaweed cultivation has been derived from input-output multipliers for fishing, and for aquaculture. These have been adapted to reflect the strongest sectoral linkages, based on the supply chain analysis conducted as part of the scenarios. Moreover, they have been adjusted to account for linkages that may be more developed in the future. Table F1 sets out the inputs which have been used to develop the multiplier.

Table F1 Multiplier for seaweed cultivation for the higher growth scenario

Sector	Direct and indirect effect by industry group	Notes
Seaweed	1000	Conservative estimate
Electrical equipment	2.2	Based on the average input of electrical equipment for fishing and aquaculture
Repair and maintenance	24.7	Based on the average input of repair and maintenance services for fishing and aquaculture
Wholesale – excluding vehicles	30.2	Based on wholesale (excluding vehicles) for the fishing sector
Other land transport	14.9	Based on the average input of other land transport for fishing and aquaculture
Water transport	0.5	Based on the average input of water transport for fishing and aquaculture
Food & Beverage services	2.3	Based on food and beverage services for the aquaculture sector
Financial services	17.7	Based on the average input of financial services for fishing and aquaculture
Total	1092.48
Adjustment factor	1.30821	Adjustment factor to account for linkages that may become more developed over the period 2021-2040 and other sectoral linkages unaccounted for above (as based on similar sectors) . Calculated as the average difference between Type 1 multipliers for fishing and aquaculture, and adjusted Type 1 multipliers for fishing and aquaculture
Seaweed cultivation multiplier	1.429

Output multiplier for seaweed-based products

F.3.5 For the purpose of assessing the impacts on businesses who produce seaweed-based products and their associated supply chains, three multipliers have been developed. Since there are no seaweed-based product multipliers available in Scotland, the input-output multipliers from other, similar, industries have been used. These have been adjusted to account for only the inputs which are relevant to the seaweed industry.

F.3.6 The analysis is broken down into three product categories, which are human food products, bioactives, and all other seaweed-based products. The multipliers which have been developed use fish and fruit processing, pharmaceuticals, and agrochemicals, respectively, as a starting point. The multipliers have been adjusted, by removing the primary inputs as well as removing inputs which are not relevant for the seaweed industry. The inputs which have been used are:

• Manufacturing inputs: Fabricated metal, electrical equipment, computers and electronics, machinery and equipment, rubber and plastic, repair and maintenance;
• Utilities: Electricity, gas, water and sewerage, waste management;
• Construction;
• Wholesale and retail: Wholesale (excluding vehicles) and retail (excluding vehicles);
• Transport: Rail transport, water transport, air transport, other land transport, support services for transport, other transport equipment, Post & Courier;
• Financial: Financial services, insurance and pensions; and
• Professional services and administration: Business support services, employment services, legal activities, accounting and tax services, other professional services, research and development, advertising and market research, rental and leasing services, public administration and defence.

F.3.7 Table F2 provides a breakdown of the multiplier by input and product type^[71]:

Table F2 Direct and indirect effects for each product category by input type

Sector	Human food products	Bioactive products	All other products
Own industry	1000	1000	1000
Manufacturing	26.97	6.14	6.75
Utilities	44.28	13.65	100.93
Construction	11.83	2.46	6.32
Wholesale and retail	106.32	15.39	46.47
Transport	41.02	9.21	29.56
Financial	24.97	13.58	21.18
Information and communication	4.21	2.79	3.20
Professional services and administration	25.45	12.59	12.90
Total	1,285	1,075	1,227

F.4 Methodological steps for applying output multipliers

F.4.1 The process of applying the output multipliers set out in Appendix subsection F.3 to estimate direct, indirect and total turnover is as follows:

1. Adjust estimated turnover by taxes less subsidies to obtain direct effect;

2. Apply output multiplier to turnover (for production and each product separately) as projected under the scenarios to estimate the economic impact of the industry and its supply chain (total effect); and

3. Subtract direct effect from total effect to estimate indirect effect.

F.5 Assumptions for GVA and employment estimates

F.5.1 The results of this analysis are based on projected scenarios which inherently give rise to a number of uncertainties because they are estimating impacts in the future. Moreover, given the emergent nature of the industry there is a sizable gap in industry specific data. As such, a number of assumptions have been made to enable the analysis of GVA and employment.

F.5.2 There are currently no published Scottish seaweed GVA effect or employment effect multipliers available. As such, this analysis has used multipliers from other, similar, industries in Scotland as a best available proxy to estimate the impacts that the Scottish seaweed industry may have upon the economy. The specific effect multipliers which have been used are set out as follows:

• The aquaculture GVA effect and employment effect multipliers have been used to estimate the impacts of seaweed production (wild harvested only under BAU and wild harvested and cultivated under the higher growth scenario);
• The fish and fruit processing GVA effect and employment effect multipliers have been used to estimate the impacts of seaweed food products for human consumption;
• The pharmaceutical GVA effect and employment effect multipliers have been used to estimate the impacts of bioactive products; and
• The Inorganic chemicals, dyestuffs and agrochemicals GVA and employment effect multipliers have been used to estimate the impact of all other seaweed-based products.

F.5.3 Moreover, the following assumptions have been made to enable the modelling of economic impacts:

• Turnover adjusted for taxes less subsidies is assumed to represent final demand for the industry;
• It is assumed that there is spare capacity in the economy to meet the extra demand;
• It is assumed that newly created economic activity is entirely additional, that is it does not replace other activity

F.6 Methodological steps for applying effect multipliers

F.6.1 This subsection sets out the methodology used to estimate the economic impact of the Scottish seaweed industry. The economic impact on the economy is measured by estimated GVA, whilst the impact on employment is measured as the maximum number of FTE that are estimated to be created by the industry.

F.6.2 The specific multipliers which have been used are set out in Table F3 (see assumptions in Section F5).

Table F3 GVA effect and employment effect multipliers

Subsector	GVA effect		Employment effect
	Type 1	Type 2	Type 1	Type 2
Seaweed production	0.57	0.64	7.30	8.26
Seaweed food products	0.53	0.63	9.84	11.20
Bioactive products	0.86	1.00	3.88	5.87
Other products	0.61	0.73	6.36	7.95

F.6.3 The process of applying the effect multipliers set out in Table F3 to estimate total GVA and FTE supported by the Scottish seaweed industry is described as follows:

• Adjust estimated turnover by taxes less subsidies;
• Apply GVA effect type 1 multiplier to estimated turnover as projected under the scenarios to estimate the direct and indirect economic impact of the industry and its supply chain;
• Apply GVA effect type 2 multiplier to estimated turnover as projected under the scenarios to estimate the direct, indirect and induced economic impact of the industry and its supply chain;
• Subtract the resulting impact of GVA effect type 1 multipliers from the resulting impact of GVA effect type 2 multipliers to estimate the induced effect of the seaweed industry;
• Apply employment effect type 1 multipliers to estimated turnover as projected under the scenarios to estimate the impact on jobs within the industry and its supply chain;
• Apply employment effect type 2 multipliers to estimated turnover as projected under the scenarios; and
• Subtract FTE arising from employment effect type 1 from FTE arising from employment effect type 2 to estimate the induced number of FTE.

F.7 Results under the BAU and Higher Growth Scenarios

F.7.1 This subsection sets out the key results from applying the process described in the previous subsection on the Scottish seaweed industry. Full results are presented within the calculation tables presented in Appendix G.

BAU key findings

F.7.2 The results presented here reflect the projected evolution of the Scottish seaweed industry under the BAU scenario in terms of GVA impact and the number of FTE jobs supported. Table F4 below reports the findings:

Table F4 GVA and employment impacts under BAU scenario

	2021	2030	2040
GVA type 1 (Direct and Indirect)	£3.6 million	£7.8 million	£11.5 million
GVA type 2 (Induced)	£0.6 million	£1.3 million	£1.9 million
GVA Total Impact	£4.2 million	£9.1 million	£13.4 million
Employment Type 1 (Direct and Indirect)	40	90	130
Employment Type 2 (Induced)	10	20	30
Employment Total Impact	50	110	160

Rounding may lead to figures not summing exactly in some cases. GVA values are nominal values and are rounded to nearest £0.1 million, FTE rounded to nearest 10.

Higher Growth Scenario

F.7.3 The results presented here reflect the projected evolution of the Scottish seaweed industry under the higher growth scenario in terms of GVA impact and the number of FTE jobs supported. Table F5 below reports the findings:

Table F5 GVA and employment impacts under higher growth scenario

	2021	2030	2040
GVA type 1 (Direct and Indirect)	£3.7 million	£13.8 million	£38.5 million
GVA type 2 (Induced)	£0.6 million	£2.4 million	£6.6 million
GVA Total Impact	£4.3 million	£16.2 million	£45.1 million
Employment Type 1 (Direct and Indirect)	40	160	400
Employment Type 2 (Induced)	10	30	90
Employment Total Impact	50	190	490

Rounding may lead to figures not summing exactly in some cases. GVA values are nominal values and are rounded to nearest £0.1 million, FTE rounded to nearest 10

F.8 Impact on the Scottish Economy

F.8.1 The results from the previous subsection (F.6) set out the estimated impact of the Scottish seaweed industry in terms of economic contributing to GVA and the maximum number of jobs supported through the industry. This subsection presents those results in the context of the overall Scottish economy.

F.8.2 Before presenting the results, it is important to set out some assumptions made with regard to the economy in Scotland. Baseline statistics are set out in Table F6.

Table F6 Assumptions around the Scottish economy

Metric	Value	Assumption	Source
Working age population (2019)	3,497,800		Nomis (2019) Labour market profile – Scotland. Office of National Statistics. Accessed at Labour Market Profile - Nomis - Official Labour Market Statistics (nomisweb.co.uk)
Estimated change in working age population 2019 to 2040	-0.05%	NRS projections provide estimates for the period 2018-2038 (0.10%) and 2018-2043 (-0.20%). This value assumes the change for the period 2019-2040 is the average of the two.	NRS (2019) Projected Population of Scotland (2018-based). Accessed at Population Projections Scotland | National Records of Scotland (nrscotland.gov.uk)
Estimated working age population in 2040	3,496,051	Applies the estimate from above
Proportion of working age population who are economically active in 2040	79%	Assumed the proportion of working age population who are economically active remains unchanged	Nomis (2019) Labour market profile – Scotland. Office of National Statistics. Accessed at Labour Market Profile - Nomis - Official Labour Market Statistics (nomisweb.co.uk)
Estimated number of people who are economically active in 2040	2,768,615
Unemployment rate in 2040	4.1%	Assumed the unemployment rate, as a % of those who are economically active, remains constant	Nomis (2019) Labour market profile – Scotland. Office of National Statistics. Accessed at Labour Market Profile - Nomis - Official Labour Market Statistics (nomisweb.co.uk)
Estimated number of unemployed in Scotland in 2040	113,943
Estimated GVA in 2018	£143.32 billion		Statista (2020) Scotland: Gross value added from 2000-2018. Accessed at Gross value added (GVA) in Scotland 2018 | Statista
Estimated GVA in 2040	£182.32 billion	Government estimates for growth of GVA for the period 2020 to 2030 are 1.1% annually. This is assumed to remain constant for the period 2018-2040	Harari, D. and Ward, M. (2021) Regional and country economic indicators. Briefing paper, number 06924. Accessed at Regional and National Economic Indicators - House of Commons Library (parliament.uk)

Rounding may lead to figures not summing exactly in some cases. GVA values rounded to nearest £0.1 million, FTE rounded to nearest 10

F.8.3 Table F7 sets out the estimated impacts of the Scottish seaweed industry in 2040 in relation to the overall Scottish Economy.

Table F7 National impacts in 2040

Impact	BAU	Higher Growth
Estimated GVA in 2040	£182 billion	£182 billion
Seaweed GVA type 1 (direct and indirect) as a proportion of Scotland's GVA	0.0063%	0.0211%
Seaweed GVA type 2 (induced) as a proportion of Scotland's GVA	0.0011%	0.0036%
Total Seaweed GVA as a proportion of Scotland's GVA	0.0074%	0.0247%
Estimated number of unemployed in 2040	113,943	113,943
Estimated change in the number of unemployed from the Type 1 (direct and indirect) seaweed impacts	-0.11%	-0.35%
Estimated change in the number of unemployed from the Type 2 (induced) seaweed impacts	-0.02%	-0.08%
Estimated change in the number of unemployed as a result from total seaweed impacts	-0.14%	-0.43%

F.9 Impacts within illustrative communities

F.9.1 This subsection reports the results of the seaweed industry in the context of two distinct illustrative Scottish communities. The first is an Island community, whilst the second represents a mainland community (Table F8). This is intended to provide insight into the potential impacts on representative communities within Scotland. For the purpose of estimating impacts, it has been assumed that jobs are fully retained within the community. Naturally, the degree to which a given community would benefit from the seaweed industry would depend on the concentration of industry within that community and the extent to which jobs are retained locally. Moreover, it has been assumed for the purpose of estimation, that jobs are taken up by local people. However, the extent of impacts may differ in reality depending on whether migration is required to fulfil the jobs created by the industry.

Table F8 Statistics for two illustrative communities in 2040

Statistics	Island Community	Mainland Community
Population	23,000	74,000
Number of people who are economically active	12,000	34,000
Unemployment rate	2.8%	4.5%
Number of people of are unemployed	340	1500
Total GVA for community	£690 million	£1.7 billion

Rounding may lead to figures not summing exactly in some cases. GVA values rounded to nearest £0.1 million, FTE rounded to nearest 10

Source: GOV.UK website

F.9.2 Having set out the general characteristics of these two communities, this subsection will now report the impact that the Scottish seaweed industry would have upon these communities if it were to develop and concentrate within the community over the period 2021 to 2040. Specifically, impacts are estimated with a concentration of 25% of the industry locating in each community. It should be noted that the actual impacts experienced within given communities will depend on the specific characteristics of a community and on the extent to which industry concentrates within each community.

Island community

F.9.3 The island community is an illustrative representation of an island community in Scotland with a relatively small population. Its remote nature would mean that connections to more developed areas of Scotland are likely to be less established than that of the mainland community. As such, it is likely to be experiencing greater economic and social challenges than the mainland community. The following Table F9 sets out estimated impacts of the Scottish seaweed industry in 2040 under the BAU and higher growth scenario. It should be noted that whilst these figures are presented for 2040, they represent the organic development of the industry across a 20 year period (i.e. the overall change to GVA or to employment would not take place all at once, but would increase over the period in line with the scenario projections). As such, they should be treated as illustrative examples of what the economic outlook of the community may look like if the industry were to concentrate in the community in the form of a cluster under the different growth scenarios.

Table F9 Illustrative impacts for an island community in 2040 with an industry concentration of 25%

Impact	BAU	Higher Growth
Seaweed GVA type 1 (direct and indirect) as a % of the communities GVA	0.42%	1.4%
Seaweed GVA type 2 (induced) as a % of the communities GVA	0.07%	0.24%
Total seaweed GVA as a % of the communities GVA	0.49%	1.63%
Change in the number of unemployed when including the seaweed industry and its supply chain (Type 1, (direct and indirect)	-9.7%	-29.4%
Change in the number of unemployed arising from higher spending (Type 2, induced)	-2%	-6.9%
Total change in the number of unemployed (Type 1 + Type 2)	-11.8%	-36.3%

Rounding may lead to figures not summing exactly in some cases. GVA values rounded to nearest £0.1 million, FTE rounded to nearest 10

Mainland community

F.9.4 The mainland community is an illustrative representation of a community located on the east coast of Scotland, with a relatively large population. It is located close to more developed areas of Scotland with good transport links to major hubs. It is likely to be experiencing more prosperous economic conditions than the island community. The following Table F10 sets out the estimated impacts of the Scottish seaweed industry in 2040 under the BAU and higher growth scenario. As per the island community, these figures are presented for 2040 to provide an illustration of the potential economic outlook if the seaweed industry were to concentrate in the community in the form of a cluster under the different growth scenarios. Whilst the impacts are presented for 2040, they represent the natural development of the industry across a 20 year period (i.e. the overall change to GVA or to employment would not take place all at once, but would increase over the period in line with the scenario projections).

Table F10 Illustrative impacts for a mainland community in 2040 with an industry concentration of 25%

Impact	BAU	Higher Growth
Seaweed GVA type 1 (direct and indirect) as a % of the communities GVA	0.17%	0.56%
Seaweed GVA type 2 (induced) as a % of the communities GVA	0.03%	0.10%
Total seaweed GVA as a % of the communities GVA	0.20%	0.66%
Change in the number of unemployed when including the seaweed industry and its supply chain (Type 1, direct and indirect)	-2.1%	-6.4%
Change in the number of unemployed arising from higher spending (Type 2, induced)	0.4%	1.5%
Total change in the number of unemployed (Type 1 + Type 2)	2.6%	7.9%

Rounding may lead to figures not summing exactly in some cases. GVA values rounded to nearest £0.1 million, FTE rounded to nearest 10

F.10 References

Cefas, 2016. Seaweed in the UK and abroad – status, products, limitations, gaps and Cefas role. [Online] Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/546679/FC002I__Cefas_Seaweed_industry_report_2016_Capuzzo_and_McKie.pdf (accessed May 2020).

Crown Estate Scotland 2021. Economic feasibility study on seaweed: Cultivation and supply scenario. A report by Enscape Consulting Ltd, SAMS and Imani Development for Crown Estate Scotland. March 2021.

FAO. 2019. FAO yearbook. Fishery and Aquaculture Statistics 2017/FAO annuaire. Statistiques des pêches et de l'aquaculture 2017/FAO anuario. Estadísticas de pesca y acuicultura 2017. Rome/Roma.

FAO, 2018. The global status of seaweed production, trade and utilization. Globefish Research Programme Volume 124. Rome. 120 pp. Licence: CC BY-NC-SA 3.0 IGO.Guiry, 2020

Harari, D. and Ward, M. (2021) Regional and country economic indicators. Briefing paper, number 06924. Accessed at Regional and National Economic Indicators - House of Commons Library (parliament.uk)

Nomis 2019. Labour market profile – Scotland. Office of National Statistics. Accessed at Labour Market Profile - Nomis - Official Labour Market Statistics (nomisweb.co.uk)

Norton, D., Hynes, S. and Boyd, J., 2014. Valuing Ireland's blue ecosystem services. Socio-Economic Marine Research Unit (SEMRU) report series. National University of Ireland, Galway, pp 1–58.

NRS 2019. Projected Population of Scotland (2018-based). Accessed at Population Projections Scotland | National Records of Scotland (nrscotland.gov.uk)

Statista 2020. Scotland: Gross value added from 2000-2018. Accessed at Gross value added (GVA) in Scotland 2018 | Statista